§ 32.2   Basis of the accounts.

   (a) The financial accounts of a company are used to record, in monetary
   terms, the basic transactions which occur. Certain natural groupings of
   these transactions are called (in different contexts) transaction
   cycles, business processes, functions or activities. The concept,
   however, is the same in each case; i.e., the natural groupings
   represent what happens within the company on a consistent and
   continuing basis. This repetitive nature of the natural groupings, over
   long periods of time, lends an element of stability to the financial
   account structure.

   (b) Within the telecommunications industry companies, certain recurring
   functions (natural groupings) do take place in the course of providing
   products and services to customers. These accounts reflect, to the
   extent feasible, those functions. For example, the primary bases of the
   accounts containing the investment in telecommunications plant are the
   functions performed by the assets. In addition, because of the
   anticipated effects of future innovations, the telecommunications plant
   accounts are intended to permit technological distinctions. Similarly,
   the primary bases of plant operations, customer operations and
   corporate operations expense accounts are the functions performed by
   individuals. The revenue accounts, on the other hand, reflect a market
   perspective of natural groupings based primarily upon the products and
   services purchased by customers.

   (c) In the course of developing the bases for this account structure,
   several other alternatives were explored. It was, for example,
   determined that, because of the variety and continual changing of
   various cost allocation mechanisms, the financial accounts of a company
   should not reflect an a priori allocation of revenues, investments or
   expenses to products or services, jurisdictions or organizational
   structures. (Note also § 32.14 (c) and (d) of subpart B.) It was also
   determined that costs (in the case of assets) should not be recorded
   based solely upon physical attributes such as location, description or
   size.

   (d) Care has been taken in this account structure to avoid confusing a
   function with an organizational responsibility, particularly as it
   relates to the expense accounts. Whereas in the past, specific
   organizations may have performed specific functions, the future
   environment with its increasing mechanization and other changes will
   result in entirely new or restructured organizations. Thus, any
   relationships drawn between organizations and accounts would become
   increasingly meaningless with the passage of time.

   (e) These accounts, then, are intended to reflect a functional and
   technological view of the telecommunications industry. This view will
   provide a stable and consistent foundation for the recording of
   financial data.

   (f) The financial data contained in the accounts, together with the
   detailed information contained in the underlying financial and other
   subsidiary records required by this Commission, will provide the
   information necessary to support separations, cost of service and
   management reporting requirements. The basic account structure has been
   designed to remain stable as reporting requirements change.

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